Tariffs are weighing down Jack Daniel’s

Brown-Forman, which owns liquor brands like Jack Daniel’s Whiskey and Herradura Tequila, had a good year. It might have been a great one without US president Donald Trump’s trade wars.

The global liquor conglomerate reported its annual results today, and beat expectations by reporting a 5% increase in net sales. But the company also said its gross profit margins fell 1.6% due to the costs of tariffs imposed by the European Union in response to Trump’s own trade taxes on European steel and aluminum.

Four of Brown-Forman’s biggest markets are EU countries—the United Kingdom, Poland, Germany, and France—which made up 18% of the company’s sales this year. Brown-Forman had to raise its prices as much as 10% in addition to absorbing some of the costs itself.

Calling out “targeted tariffs from the EU” because their authors specifically went after iconic American brands (Harley Davidson is another victim), CEO Lawson Whitney said it is “a tough situation, we continue to work with our leaders on the US and abroad…to seek a quick resolution of those tariffs.”

The long-time Tennessee whiskey purveyor noted that its strong brand portfolio and investment inured it from the cost of the tariffs. But as a major exporter (more than half of its products are consumed outside the US) the company is at the mercy of global economic trends.

Besides the ongoing trade spats, Brown-Forman also lost out thanks to the rising US dollar, which makes American exports more expensive and imports cheaper. The Federal Reserve’s recent gradual tightening of US interest rates has helped boost the value of American currency, but many observers are expecting a cut this June.

The big trend the company is watching next year? The rising prices of its inputs, particularly agave. The Mexican cactus provides the raw material for tequila production, but the cost of the plant is rising as consumers buy more 100% agave tequilas than they did in the past.